As the end of the year approaches, I’m reminded of one of my holiday tradition movies—the Wizard of Oz. This year, just like Dorothy on her journey to Oz, employers may encounter a trio of new ACA challenges in their reporting journey. No, not “Lions and tigers and bears. Oh my!”, but “Layoffs and furloughs and new codes. Oh my!”
You may be doing ACA reporting for the first time for laid-off or furloughed employees during the year. Or other new questions may come up– like what should an organization do if it dropped below the Applicable Large Employer standard during 2020? Must reporting still be done? And how is coverage under an Individual Coverage Health Reimbursement Account (ICHRA) reported?
Reporting for laid-off employees
For ACA reporting purposes, “laid off” means the employee was terminated from your organization, so you offered COBRA and did other termination out-processing, like paying out unused vacation or rolling over retirement accounts. Under the ACA, employers are not required to make a health coverage offer during months an individual was not an employee. So for laid-off employees, report as you would any other termination—using the codes for COBRA offers.
Reporting for furloughed employees
First, let’s define “furlough” for the purposes of this article. Furlough is when an employee is placed on unpaid leave, with the intent of returning them to work when the situation changes. A furloughed employee is not terminated and remains on the employer’s books during the leave period. Being certain whether an employee was terminated or put on furlough is necessary to make the correct reporting decision on the individual.
Since furloughed employees are not terminated, they were entitled to continue receiving benefits that meet the ACA’s standards (Minimum Essential Coverage, Minimum Value, and Affordable) during the furlough period. Their full-time status continues during the unpaid furlough period, and the reduction of their work hours doesn’t stop the coverage offer requirement. However, it could affect their eligibility for benefits in a future stability period.
The reason behind this continuing eligibility is that the ACA considers the employee as full-time through the entire current stability period, provided they worked sufficient hours to be considered full-time during the affiliated standard lookback measurement period.
Code the furlough months as you would for any active full-time employee. Note that the lack of pay during furlough periods could cause affordability issues in the furlough months. That discussion is beyond this article’s scope; if you have concerns, contact Employers Council to discuss.
What about Employees who returned or were rehired?
Under ACA rules, a full-time employee who returns from unpaid leave or is rehired within 13 weeks for non-educational organizations, or 26 weeks for educational organizations, must be treated as a continuing employee rather than a new hire. That means their full-time status would be restored upon rehire, and they need not fulfill the health plan’s waiting period before resuming coverage. If the rehire happened in the middle of the month, coverage must be started again no later than the first of the following month. If they declined coverage prior to the layoff, you do not have to make an offer of coverage upon return—they continue in “decline” status until the end of the stability period.
If the employee was returned outside the applicable time frame mentioned above, you may generally treat them as a new employee. Full-time status is determined under the new hire rules, which means they can be required to fulfill the plan’s waiting period before benefit coverage begins.
How do I determine ALE status for 2020 reporting and 2021 coverage offers?
An employer’s Applicable Large Employer (ALE) status is fixed at the start of each calendar year, so employers who met the qualifications in 2019 would be an ALE for all of 2020. That means you must still report for 2020 in early 2021.
If your organization fell below the ALE requirement during 2020 due to layoffs, you’ll need to assess whether you meet the ALE requirements for 2021. See the IRS guidance here, or contact Employers Council for details if you need to do this calculation. In determining your FT employee count, remember not to count hours for laid-off employees or those on unpaid furlough. Do include all hours for which employees were paid in the calculation (ex. FFCRA Sick Pay or EFMLEA).
If you meet the ALE criteria for 2021 based on 2020 employee calculations, you’ll need to offer health coverage based on ACA for 2021. If you do not, make a note to recheck at the end of the year for 2022. If you qualify as an ALE again for 2022, you’ll to offer ACA health coverage by April 1, 2022, to avoid penalties.
For ICHRA Offerings Only: New Line and Codes
For 2020, new Line 14 codes and a new line 17 were added for reporting coverage under an Individual Coverage Health Reimbursement Account.
- Line 14: Codes 1L-1Q were added to report ICHRA coverage situations. See the IRS Instructions for details.
- Line 16: No new codes added
- Line 17: New Line! This line is for reporting the ZIP code used to calculate the “Employee Required Contribution” for employees purchasing individual Exchange coverage using an employer-provided ICHRA contribution. The Employee Required Contribution is the difference between the employer-provided ICHRA amount and the actual cost for self-only coverage under the lowest-cost silver plan offered by the Exchange. The Exchange plan cost can either be based on the employee’s primary employment site (safe harbor) or for their primary residence during each month. To find the appropriate Silver Plan costs, use the Exchange lookup tables. The premium amount is based on the employee’s age at the start of the year (if the ICHRA was offered from the beginning of the year) or their age at the time the ICHRA was offered. See the IRS instructions at the link above for more details.
FILING DATES REMINDERS:
The deadline for 1095-C (or 1095-B) reports to individuals has been extended to March 2, 2021, from January 31, 2021. No other extensions are permitted for this deadline.
The IRS filing deadline has not been extended; it remains March 1, 2021, for paper filings, and March 31, 2021, for electronic filings.
Contact Employers Council for assistance with your ACA reporting questions as you continue your journey to ACA Oz!